Bugg v. Gray (In re Gray)
| Citation | 519 B.R. 767 |
| Decision Date | 24 November 2014 |
| Docket Number | BAP No. 14–6027. |
| Parties | In re Cyril M. GRAY, Debtor. Eldon K. Bugg; Danny Bugg, Creditors–Appellants v. Cyril M. Gray, Debtor–Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit |
The appellants, Eldon K. Bugg, Boonville, MO, Danny Bugg, Hot Springs, AR, were not represented by counsel.
The appellee did not participate in the appeal.
Before FEDERMAN, Chief Judge, KRESSEL and SCHERMER, Bankruptcy Judges.
The appellants, Eldon Bugg and Danny Bugg, appeal from an order of the bankruptcy court finding that they had willfully violated the automatic stay and awarding actual and punitive damages. For the reasons below, we affirm the award of actual damages but reverse the award of punitive damages.
On October 14, 2013, the debtor, Cyril M. Gray, filed a Chapter 13 petition. At the time of filing, the debtor was living in rental property owned by the Buggs. According to the Buggs, the debtor had failed to pay any rent since May 2013. On November 13, 2013, the Buggs filed a motion to “Terminate Stay, Alternatively for Order of Possession, and Motion for Declaration of Non–Stay and for Immediate Hearing on Both Motions.” A hearing was set for December 18, 2013.
On December 17, 2013, the debtor filed a motion requesting that the December 18 hearing be continued. We cannot tell from the record whether the Buggs either consented to or objected to this continuance. In any case, the hearing was continued to January 23, 2014. Then, on January 21, 2013, the Buggs made their own motion to continue the hearing. The court granted the request and the hearing was postponed again to February 20, 2014.
A hearing on the motion was finally held on February 20, 2014. Apparently the continuances allowed the parties time to negotiate because when they appeared in court they announced that a settlement had been reached. They agreed to modify the stay as to the Buggs, effective fourteen days after the entry of the order.
It was not until March 19, 2014 that the bankruptcy court issued a written order regarding the parties' agreement2 . The order specified that the stay was terminated in regards to the debtor's interest in his principal residence. The order also stated that Federal Rule of Bankruptcy Procedure 4001(a)(3) applied, therefore, the order was not effective until fourteen days after its entry.
Meanwhile, the Buggs apparently believed that the stay terminated on March 6, 2014. They decided that the fourteen day period began running on February 20, the date of the hearing. Accordingly, on March 8, 2014, the Buggs evicted the debtor. They changed the locks and five days later they removed his personal property and towed his truck from the premises, damaging it in the process.
On April 4, 2014, the debtor filed a “Motion for Contempt for Violation of the Automatic Stay.” After some procedural delays a trial was held on June 10, 2014. Danny Bugg appeared personally. Eldon Bugg did not appear but an attorney appeared on his behalf for the limited purpose of requesting a continuance. The request for a continuance was denied and Eldon Bugg's attorney was excused. The matter proceeded to trial and at its conclusion a ruling was read onto the record.
On June 16, 2014, the bankruptcy judge issued an order granting the debtor's motion. The order is entitled “Order Granting Motion for Contempt for Violation of the Automatic Stay at § 362(a).”
This is a misnomer. Contempt is not a remedy for a violation of the automatic stay. Contempt is a remedy for violating court orders, not statutes. See Sosne v. Reinert & Duree, P.C. (In re Just Brakes Corp. Sys., Inc.), 108 F.3d 881, 885 (8th Cir.1997) (citing Moratzka v. Visa (In re Calstar, Inc.), 159 B.R. 247 (Bankr.D.Minn.1993) ). The bankruptcy court did not hold the Buggs in contempt. Instead, it is clear that the court awarded the debtor damages under § 362(k). The Buggs were ordered to (1) return the debtor's truck or pay $7,000, jointly and severally, for its value, (2) pay $422, jointly and severally, for damage sustained to the truck during towing, (3) return all of the debtor's personal property or pay $100 per day, jointly and severally, until the property is returned, (4) pay $300, jointly and severally, for damages incurred from the disposition of the personal property, (5) pay $2,500, jointly and severally, for the debtor's attorney's fees, and lastly (6) Eldon Bugg was ordered to pay $2,000 to the debtor as punitive damages. The bankruptcy court also reserved the right to hold the Buggs in contempt at a later time if they did not comply with the order.
On June 24 and June 27, 2014, Danny Bugg and Eldon Bugg, respectively, filed motions for relief from the June 16, 2014 order. Both motions were denied. On July 7, 2014, the Buggs filed a timely notice of appeal.
A bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. Johnson v. Fors (In re Fors), 259 B.R. 131, 135 (8th Cir. BAP 2001) (citing Snyder v. Dewoskin (In re Mahendra), 131 F.3d 750, 754 (8th Cir.1997) ). An award of sanctions is reviewed for an abuse of discretion. Garden v. Central Nebraska Housing Corp., 719 F.3d 899 (8th Cir.2013) (citing Schwartz v. Kujawa (In re Kujawa), 270 F.3d 578, 581 (8th Cir.2001) ).
The Buggs first argue that the bankruptcy court did not have jurisdiction over the debtor's motion for contempt. According to the Buggs, their actions only affected exempt personal property and bankruptcy courts do not have jurisdiction over property that does not belong to the estate. The Buggs are mistaken.
Subject matter jurisdiction is governed by 28 U.S.C. § 1334, which provides:
Pursuant to the delegation powers in 28 U.S.C. § 157(a), “[e]ach district court may provide that any or all cases under title 11 and any or all proceedings under title 11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.” “Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 ...” 28 U.S.C. § 157(b)(1).
In this case, the bankruptcy court had both the jurisdiction and the authority to decide the debtor's motion. The debtor initiated an action that hinged solely on whether there was a willful violation of the automatic stay. This action is created by 11 U.S.C § 362(k). Thus, it clearly arises under title 11. The bankruptcy court has jurisdiction to hear “all civil proceedings arising under title 11.” 28 U.S.C. § 1334(b). Additionally, this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2), which the bankruptcy court had the authority to determine3 .
SECTION 362(e)
The Buggs argue that the bankruptcy court could not have properly found them in violation of the automatic stay because the stay had lapsed by operation of 11 U.S.C. § 362(e)(2) long before they evicted the debtor. Specifically, the Buggs argue that the stay lapsed on January 12, 2014, 60 days after their November 13, 2013 motion was filed. As a matter of law, if the stay terminated on January 12 then their actions to evict the debtor on March 8 could not have constituted a violation of the stay.
Section 362(e) provides:
Pursuant to § 362(e)(1), the failure to hold a preliminary hearing within thirty days of the date of a request for relief would have the effect of terminating the stay. See Borg–Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982). Section 362(e)(2) provides for the automatic termination of the stay in an individual case if a final decision on the motion is not rendered within 60 days after a request for relief is made. See In re Aulicino, 400 B.R. 175, 179 (Bankr.E.D.Pa.2008).
Section 362(e) was enacted to protect creditors. The legislative history highlights Congress' intent:
823 F.2d 788, 792 (4th Cir.1987).
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...if the creditor is aware of the bankruptcy filing, any intentional act that results in a violation of the stay is willful. In re Gray, 519 B.R. 767 (8th Cir. BAP 2014). Here the Bankruptcy Court found Defendants had notice of Caldwell's bankruptcy filing and continued with the contempt proc......
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...remedy for a violation of the automatic stay. Contempt is a remedy for violating court orders, not statutes." Bugg v. Gray (In re Gray ), 519 B.R. 767, 771 (B.A.P. 8th Cir. 2014). Rather, section 362(k) applies to damage awards for violation of the automatic stay. Sosne v. Reinert & Duree, ......
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...the compensatory-damage award but reversed the punitive-damage award in an opinion handed down in December 2014. See In re Gray , 519 B.R. 767 (B.A.P. 8th Cir. 2014). Bugg appealed again. Bugg prevailed. In April 2016, the Eighth Circuit Court of Appeals issued an opinion, In re Gray , 642 ......
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...affirmed the compensatory-damage award but reversed the punitive-damage award in an opinion handed down in December 2014. See In re Gray, 519 B.R. 767 (B.A.P. 8th Cir. 2014). Bugg appealed again. Bugg prevailed. In April 2016, the Eighth Circuit Court of Appeals issued an opinion, In re Gra......